Advent in breakthrough Mexican deal

The global private equity firm has acquired a major clothing retailer in Mexico for $200 million. The deal includes $90 million in cash-flow based debt.

Advent International, the Boston-based, global private equity firm, has acquired Mexico’s largest discount clothing store chain in a deal valued at $200 million.

The firm announced the leveraged buyout of Controladora Milano, which has 257 stores in 120 cities in Mexico. The company has roughly $260 million in annual sales.

According to a press release, the deal involved $110 million in equity and $90 million in debt. The firm describes this as Mexico’s “first private-equity-backed transaction in the middle market to use significant leverage based mainly on cash flow.”

Advent is acquiring the company from an investor group led by Newbridge Latin America. Advent is the lead in a syndicate of investors including Capital International, BBVA Proyectos Empresariales and the Netherlands Development Finance Company.

Debt was provided by Standard Bank of South Africa and Scotiabank of Canada. Several unspecified Mexican banks were also involved in the debt syndicate, according to the release.

“Milano is an extremely well known brand in Mexico,” said Alfredo Alfaro, director in charge of Advent’s Mexico City office, in a statement.

The investor group has tapped Eduardo Zea as Milano’s new chief executive. Zea is the former CEO of Sears de Mexico.

Advent’s investment comes from its Latin America Private Equity III and from its Global Private Equity V funds. The Latin America fund closed last year on $375 million. The Global fund closed last year on $3.3 billion.

Mexico has drawn increased interest from private equity players recently due to its resurgent economy and pro-market reform government. The Carlyle Group is currently raising a Mexico-focused private equity fund.